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The role of offsets in a post-Kyoto climate agreement: The power sector in China

  • Partridge, Ian
  • Gamkhar, Shama
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    This paper considers how an offset scheme specific to the electricity generation sector could incentivize emissions cuts while avoiding the problems encountered by the Clean Development Mechanism (CDM). It proposes an approach to project evaluation based on measures of additionality, economic viability and contribution to sustainable development specific to this sector and re-evaluates 460 registered CDM projects in China that generate electricity using wind, natural gas or small hydro. It concludes that many small hydro schemes would be viable without the CDM subsidy. Although these projects have zero emissions from operations, offsets issued to projects that are viable without subsidy permit increased emissions in developed countries and lead to a net increase in global emissions. To provide some indication of the sustainable development benefits that CDM projects bring to their host countries, the paper includes estimates of the projects' benefit to public health due to the reduced use of coal for generation. The paper provides insights into the economics of projects and their value to host countries that are missed by the official CDM methodologies. It contributes to the debate over the design of sector-specific offset schemes that may be part of a new global agreement on combating climate change.

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    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 38 (2010)
    Issue (Month): 8 (August)
    Pages: 4457-4466

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    Handle: RePEc:eee:enepol:v:38:y:2010:i:8:p:4457-4466
    Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

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    1. Resnier, Martin & Wang, Can & Du, Pengfei & Chen, Jining, 2007. "The promotion of sustainable development in China through the optimization of a tax/subsidy plan among HFC and power generation CDM projects," Energy Policy, Elsevier, vol. 35(9), pages 4529-4544, September.
    2. James Hammitt & Ying Zhou, 2006. "The Economic Value of Air-Pollution-Related Health Risks in China: A Contingent Valuation Study," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 33(3), pages 399-423, 03.
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    4. Fischer, Carolyn, 2004. "Project-Based Mechanisms for Emissions Reductions: Balancing Trade-offs with Baselines," Discussion Papers dp-04-32, Resources For the Future.
    5. Zhang, Daisheng & Aunan, Kristin & Martin Seip, Hans & Larssen, Steinar & Liu, Jianhui & Zhang, Dingsheng, 2010. "The assessment of health damage caused by air pollution and its implication for policy making in Taiyuan, Shanxi, China," Energy Policy, Elsevier, vol. 38(1), pages 491-502, January.
    6. You, C.F. & Xu, X.C., 2010. "Coal combustion and its pollution control in China," Energy, Elsevier, vol. 35(11), pages 4467-4472.
    7. Michaelowa, Axel & Jotzo, Frank, 2005. "Transaction costs, institutional rigidities and the size of the clean development mechanism," Energy Policy, Elsevier, vol. 33(4), pages 511-523, March.
    8. Sathaye, Jayant & Phadke, Amol, 2006. "Cost of electric power sector carbon mitigation in India: international implications," Energy Policy, Elsevier, vol. 34(13), pages 1619-1629, September.
    9. Nussbaumer, Patrick, 2009. "On the contribution of labelled Certified Emission Reductions to sustainable development: A multi-criteria evaluation of CDM projects," Energy Policy, Elsevier, vol. 37(1), pages 91-101, January.
    10. Don Kenkel, 2006. "WTP- and QALY-Based Approaches to Valuing Health for Policy: Common Ground and Disputed Territory," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 34(3), pages 419-437, July.
    11. Liu, Jin-Tan & Hammitt, James K. & Liu, Jin-Long, 1997. "Estimated hedonic wage function and value of life in a developing country," Economics Letters, Elsevier, vol. 57(3), pages 353-358, December.
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